ITIF Calls for Major National Initiative to Boost Spending on Federal Research Explicitly Targeted to Increase Productivity

September 12, 2019

WASHINGTON—Over the last 40 years, Congress and successive administrations have been unable or unwilling to address the challenge of the growing national debt with spending cuts or tax increases. So a new report from the Information Technology and Innovation Foundation (ITIF), the world’s top-ranked think tank for science and technology policy, argues it is time for a new approach that focuses on growing the economy to reduce the debt-to-GDP ratio by launching a new national initiative to support the development of technologies that would spur productivity.

The new report, prepared in collaboration with a Concord Coalition project on fiscal responsibility and economic growth, recommends that Congress and the Trump administration devote significantly more direct and indirect funding to research and development (R&D) that explicitly focuses on developing technologies that will boost productivity.

“In the shadow of budget deficits that loom larger every year, boosting productivity is a critical and largely overlooked way to reduce the debt-to-GDP ratio,” said ITIF President Rob Atkinson, author of the report. “Technological innovation is key to boosting productivity, so Congress and the administration should significantly increase federal investments in R&D that is strategically targeted to technologies that will increase productivity growth rates.”

The report shows that, if targeted R&D boosts productivity from the 1.4 percent growth rate currently projected by the Congressional Budget Office to 3.4 percent a year, it would add $1.2 trillion per year in net federal revenues in 2039. This would reduce the projected annual deficit in 2039 from a projected $2.6 trillion to $1.3 trillion, and it would reduce the projected debt-to-GDP ratio from 176 percent to 92 percent.

There is currently no dedicated allocation of federal funding for research to support innovations that would boost productivity. To fill this void, the report calls for adding productivity to the current federal R&D missions, which now include, among other areas, defense, energy, and health.

“Federally supported research is not all the same. Some research areas are more likely than others to positively impact growth,” Atkinson said. “Effectively boosting economic growth through research will require the federal government to allocate the next marginal dollar toward areas that have the biggest impact on productivity.”

The report identifies the key areas of research likely to drive future productivity, including robotics, autonomous transportation systems, artificial intelligence, additive manufacturing, material sciences, microelectronics and advanced computing, and life sciences.

To improve federal support for productivity-enhancing research, the report offers a series of recommendations:

  • Congress should expand the rate of the Alternative Simplified Credit for research from 14 percent to at least 25 percent.
  • Congress should expand federal funding for R&D by $40 billion a year and target that increase to areas most likely to boost productivity.
  • Congress should allocate a share of this additional funding to industry R&D consortia to support productivity-enhancing R&D, using the current Manufacturing USA Institutes as a model.
  • Congress should direct the National Science Foundation to establish a program whereby they award $1 million per year for five years to the top 200 academic researchers doing work in areas that would boost productivity.
  • The White House Office of Science and Technology Policy (OSTP) should craft a national research roadmap for key productivity-enhancing technologies.
  • OSTP should task all federal agencies that fund research with conducting an analysis of where their research investments can have the largest impact on productivity.
  • Congress should require OSTP to establish multiagency, productivity-related R&D initiatives to identify not only key areas of R&D that have a significant potential impact on productivity, but also future areas of promise and areas where cross-agency coordination is needed.
  • Congress should use this information to guide budget allocations, increasing funding for agencies and programs that better demonstrate that their R&D efforts boost productivity.

Read the report.